WASHINGTON Aetna Inc's (AET.N) chief executive denied on Friday that its withdrawal from some Obamacare exchanges was in retaliation for government efforts to halt its merger with Humana Inc (HUM.N), as he sought to convince a federal judge to approve the deal. The U.S. Justice Department sued to stop the $34 billion (£27 billion) tie-up in July, saying that it and another insurance megamerger, Anthem Inc's (ANTM.N) planned purchase of Cigna Corp (CI.N), would mean higher prices and worse service for many consumers.
The primary disputes in Friday afternoon's testimony were whether traditional Medicare, which is managed by the government, competes with Medicare Advantage, run by insurers, and whether Aetna pulled out of some public Obamacare exchanges out of anger after the department filed its lawsuit.
Aetna's CEO Mark Bertolini said the decision was driven by the financial losses the company was incurring through the exchanges, established under President Barack Obama's signature healthcare law.
If Judge John Bates of the U.S. District Court for the District of Columbia agrees that the two types of Medicare compete, he will likely rule that there is sufficient competition in the market and allow the deal to go forward.
The government has shown that once a person signs up for Medicare Advantage, they tend not to shift to Medicare, a sign that the two do not compete.
Bertolini acknowledged that there were differences between the two programs in terms of cost, portability, types of service and size of provider networks. But he also said thousands of people become eligible every day to decide between Medicare and Medicare Advantage.
"We're really competing for the 11,000 people that retire every day," he told the court.
The government sued in July to prevent Aetna's purchase of Humana merger, on grounds that it violated antitrust law. Within weeks, Aetna said it would drop its Obamacare plans in 11 of the 15 states in which it was active.
In a July 5 letter, Bertolini told the Justice Department: "If the DOJ sues to enjoin the transaction, we will immediately take action to reduce our 2017 exchange footprint."
Asked if the letter was a threat, Bertolini said it had been requested by the Justice Department. "We were responding to their questions," he said.
The decision to pull out of some exchanges was based on a $200 million loss for the second quarter that was estimated to balloon to $350 million for the year, he said. "We've got to stop the bleeding."
The government's fight against the Anthem deal to buy Cigna for $45 billion is underway in the same courthouse. Both trials will be concluded before President-elect Donald Trump is inaugurated on Jan. 20, 2017.
Humana is the second largest Medicare Advantage insurer while Aetna is the fourth, and the two compete in more than 600 counties, the government said in its complaint.
Judge Bates said that the trial would likely end on Dec. 21 and that the case would most likely be decided in mid- to late January.
Bates is well known in legal circles as the judge who handed another antitrust enforcer, the Federal Trade Commission, one of its biggest losses when he ruled in 2004 that Arch Coal Inc (ARCH.N) could buy Triton Coal Company's Wyoming coal mines.
(Reporting by Diane Bartz; Editing by Tom Brown)